Tuesday, August 10, 2010

Tax needs to be taxing

The Tories need an enemy and as the unions don't want to play ball and stage massive national strikes this autumn, Dave has glanced at the Big Boys' Book of Soft Targets and is going after benefit fraudsters. Obviously, I'm not going to defend those who decide to rook the system, but are they the best targets?

I've always held the view that in any system, there will always be inefficiencies and while we should seek to minimise them, eradicating them is well-nigh impossible, just as the perpetual motion machine that overcomes friction is merely the preserve of fable. A system that did pretty much remove inefficiency and fraud would probably be so complex that it would collapse under the weight of administration and delivery costs, even if it did manage to pay anything to anybody. This is not defeatism, just realism.

Do we want a system that makes claiming benefits so difficult that people prefer poverty to making a claim? We already find that pensioners aren't claiming some £4 billion to which they are entitled and I'm prepared to wager that the government won't be deploying resources to deal with that injustice. Instead, we have Cameron kicking off a campaign that will have the consequence of deterring legitimate claimants and tarring all with the same brush.

It is also worth pointing out that of the £4-5 billion overpaid each year, most of that is wrongly paid because of errors on the part of the bureaucracy. About £1 billion ends up going into the pocket if fraudsters - too much, I know, but no government has cracked this tough nut over the past three decades. The blunt truth is that investigating fraud often costs more than is recovered. Clearly, that is not a reason to ignore it, but we have to be clear that real fraud prevention won't offer net savings of £1 billion and it would be unrealistic to suggest that.

Bur what if there was another target? A chance to take a share of a pot of money removed from the tax system estimated at £30 billion each year? Even nibbling at that will offer better returns than stopping benefit fraud completely. I'm talking about avoided or unpaid tax. It is odd that the same sort of person that will regard successful avoidance of tax as a sporting triumph will have nothing but contempt for those who drain a little from the system at the other end, when the reality is that both should be held in equal opprobrium. Yet, we find that HM Revenue and Customs plan to cut the number of tax collectors - a job that has been demonstrated to bring in more tax than it costs to run.

Not paying your fair share is as much an offence against society as trying to take money to which you are not entitled. Let's hear Mr Cameron say that and follow it up with action against tax fraudsters. Then we'll know that this isn't simply the Tories rounding up their usual suspects for PR value.

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